1.
Economic Forum
29 January 2019
Twitter: @ONS #Econstats #Trade
29 January 2019

2.
Agenda
09:00 – 10:00 Registration with tea and coffee
10:00 – 10:10 Welcome and introduction – Richard Heys, Deputy Chief Economist
10:10 – 10:25 Tackling the Global Measurement Challenges - Adrian Chesson
10:25 – 10:40 Understanding complex multi-national businesses - Sarah Eaton
10:40 – 10:55 21st Century Trade Statistics: Challenges and Developments – Nadim Ahmad, OECD
10:55 – 11:05 Question and answer session
11:05 – 11:20 Refreshment break
11:20 – 11:35 New frontiers in trade analysis – James Wells
11:35 – 11:55 The weaponization of trade – can data disarm the politicians? Rebecca Harding, CEO of Coriolis Technologies
11:55 – 12:00 Round-up and closing remarks – Grant Fitzner, Chief Economist

3.
Welcome and Introduction
Deputy Chief Economist
Richard Heys
29 January 2019

4.
The UK Balance of
Payments
Tackling the Global
Measurement Challenges
Head of UK Balance of Payments and Trade, ONS
Adrian Chesson
29 January 2019

5.
Some basic examples follow…
What are the balance
of payments?
Demand for the
Balance of Payments
The measurement
challenges
Rising to the
challenge

6.
The balance of
payments measure a
country’s economic
transactions with other
countries

7.
The UK current account deficit is large by historical standards
-6
-5
-4
-3
-2
-1
0
1
2
3
1948 1958 1968 1978 1988 1998 2008
Per
cent
of
GDP
UK Balance of Payments – Current account as % of GDP

8.
Demand for BoP Analysis
Current Account deficit wide by historic and international
standards
Global imbalances – if persist may become unsustainable
Increased demand to understand international trade
Higher interest in the effects of globalisation

9.
Globalisation
measurement
challenges
Digitalisation
Multi-national
Enterprises
Global
Value
Chains
Complex
corporate
structures

10.
Rising to the challenge
Increased published trade data series from around 1,000 to over 100,000
International Business Unit
FDI Analysis and Developments UK Trade Analysis and Developments

11.
Understanding multi-
national businesses
Head of the International Business Unit
Office for National Statistics
Sarah Eaton

12.
Overview
• Aims of the International Business Unit (IBU)
• Why do we need the IBU?
• Role of the largest companies in FDI statistics and in
the UK economy
• How does it work? Progress and future aspirations

13.
Aims of the IBU
• To gain a greater understanding of and the extent to which the globalisation of large
businesses and their operating models such as contract manufacturing/toll processing
impact the source data ONS collate.
• To improve the quality of the data collected from our most important businesses.
• Build stronger working relationships with respondents from key UK MNE groups.

14.
Why do we need the IBU?
We recognise that there are aspects that we may not be fully captured covering:
• Factory-less goods production
• Merchanting of goods and services;
• Contract manufacturing;
• Toll processing;
• Transfer pricing;
• Internet Related Activities;
• Cross-border use of intellectual property; and
• Special Purpose Entity (SPE) activity.
Plus many other challenges collecting timely, coherent and consistent data from our largest
businesses.

15.
Step A)
UK-owned intellectual property & raw
materials are provided to the Indonesian
manufacturer.
This is not an export, because there is
no change in ownership of the material
or intellectual property
A
B
C
Step B)
Indonesian manufacturer produces
the goods under contract.
The UK is importing a
manufacturing service
Step C)
UK-owned but Indonesian
manufactured goods are
transported to France from
Indonesia.
This is a UK export, but not an
Indonesian Export
Contract manufacturing

16.
0
10
20
30
40
50
60
70
80
90
100
top 25 top 50 top 100 top 200 top 400 top 800 top 1600 >1600 MFI & other
% total FDI assets
The role of the largest companies in foreign direct
investment
Source: Office for National Statistics
Distribution of the UK’s outward FDI stock (assets) by value, 2016
 The UK’s largest 25 outward investors accounted for half of total FDI assets in 2016

17.
The role of the largest companies in foreign direct
investment
Source: Office for National Statistics
Distribution of the UK’s outward FDI stock (liabilities) by value, 2016
 The UK’s largest 25 inward investors accounted for over one-third of total FDI liabilities in
2016
0
10
20
30
40
50
60
70
80
90
100
top 25 top 50 top 100 top 200 top 400 top 800 top 1600 >1600 MFI & other
% total FDI liabilities

18.
Impact of corporate structures on FDI statistics, 2016
(selected countries)
Value (£ billion)
Immediate Ultimate Change
United States 308.1 413.9 +105.8
Netherlands 212.1 88.0 -124.1
Luxembourg 114.8 43.2 -71.6
Jersey 68.5 24.2 -44.3
France 59.9 72.4 +12.5
Germany 59.8 75.7 +15.9
UK n/a 30.7 +30.7
Source: Office for
National Statistics
 Ultimate values lower than immediate
indicates role of corporate structures in
channelling FDI
 Also see some direct investment from
UK-based parent companies

19.
Role of FDI companies in the UK economy -
productivity by FDI link type, 2016
Mean productivity of UK companies
(aGVA per worker, £ thousands)
1) Firms with any FDI link 73.8
of which:
only inward FDI link 81.4
only outward FDI link 63.3
both inward and outward FDI links 87.3
2) Firms with no FDI link 45.9
Source: Office for National Statistics
 Companies with FDI links have higher productivity on average than those
without such links
 Those with both inward and outward links were more productive than
outward only companies despite having lower UK employment

20.
How does it work?

21.
Progress and Future Aspirations
• Working closely with approx. 30 MNEs (Visited 18 face to face)
• Strong working relationships with several large businesses
• Mainly learning, how and why MNEs structure as they do and what this means for the questions we ask and data collated?
• Improving the quality of source data.
• Learning and working with other statistical institutes
• Eurostat’s Early Warning System and GNI Pilot Investigations
• IBU can evidence the need for a tailored data collection method and account management approach for the most complex businesses.
• IBU will continue to strengthen relationships with all IBU cases and continue to improve the quality of the data collected from the MNEs.

22.
21ST CENTURY TRADE STATISTICS:
CHALLENGES AND DEVELOPMENTS
ONS ECONOMIC FORUM
London, 29 January 2019
nadim.ahmad@oecd.org

23.
Aplenty (not least asymmetries)
• International fragmentation of production
– GVCs, Social impacts (jobs, wages, gender),
industrial/investment strategies (MNEs, SMEs)
• Fiscal optimisation
– Transfer pricing, company relocations, SPEs
– IPPs
• Digitisation
– De minimis trade, Data, Mode 3 or Mode 1?
Challenges
Escapeslides:AirCruisers(USA)
HorizontalStabiliser:
AleniaAeronautica (Italy)
Centrefuselage:Alenia Aeronautica (Italy)
Final assembly:Boeing
CommercialAirplanes(USA)
VerticalStabiliser:Boeing
CommercialAirplanes (USA)
Landing gear: Messier-Dowti(France)
Electricbrakes:Messier-Bugatti(France)
Tires:Bridgestone Tires(Japan)
Doors&windows:
ZodiacAerospace (USA)
PPGAerospace (USA)
Tools/Software:DassaultSystemes(France)
Navigation:Honeywell(USA)
Pilotcontrolsystem:RockwellColins(USA)
Wiring:Safran (France)
Centrewing box:
FujiHeavyIndustries(Japan)
Engines:GEEngines (USA),
RollsRoyce(UK)
Wingbox: MitsubishiHeavyIndustries(Japan)
Wingice protection: GKNAerospace (UK)
Engine nacelles:Goodrich (USA)
Aux.powerunit: Hamilton
Sundstrand (USA)
Flightdeckseats:
Ipeco(UK)
Lavatories:
Jamco(Japan)
Cargodoors: Saab (Sweden)
Forward fuselage:
KawasakiHeavyIndustries(Japan)
SpiritAerosystems(USA)
Rakedwingtips:Korean Airlines
Aerospacedivision (Korea)
Passengerdoors:
LatécoèreAéroservices (France)
Prepreg composites:
Toray(Japan)
Rearfuselage:
Boeing South Carolina (USA)

24.
In accounting standards & guidance
• BPM6/2008 SNA >Goods for processing,
merchanting
• Guide to Global Production
In data
• FATS, TEC
In infrastructure > LCUs, Linking, EGRs
In analytical products
• TiVA
Improvements in recent years
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Foreign controlled as % of firms % exports % imports
www.oecd.org
/trade/valuead
ded

25.
Databases of:
• Balanced trade in goods and
services > including regular
asymmetry meetings at OECD
• International trade and
transport margins
• Trade prices (in development)
And more recently
Schema for merchandise trade and
TIS

26.
OECD CSSP informal expert group
recommended:
• Develop clearer and more practical
guidance on economic ownership of
assets
• Improve methods to value
investment in IP assets, including
cross-border transfers (esp.
asymmetries).
• Allocating IPPs (and SPEs) to HQ is
an option but not a panacea. Who is
the ultimate owner? Work-is on-
going
But more is needed
2008 SNA
makes
distinction
between
economic
(risks and
rewards)
and legal
ownership
But, despite
best efforts,
guidance on
identifying
economic
ownership
arguably
falls short

27.
OECD CSSP informal expert group recommended:
• Improved granularity –
– better focused aggregations in the core accounts: MNEs,
domestic firms, foreign owned affiliates, contribution of
capital services by asset
• Develop MNE accounts and LCUs
– To complement, and inform, the national view
But more is needed

28.
Mainstreaming the global within the national
– Extended Supply Use tables
Improved granularity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Gross exports Value added of
exports
Gross exports Value added of
exports
Gross exports Value added of
exports
Gross exports Value added of
exports
Denmark Finland Norway Sweden
Non-MNEs Non_MNEs, direct exports
Non-MNEs, indirect exports via other non-MNEs Non_MNEs, indirect exports via domestic MNEs
Non-MNEs, indirect exports via foreign-owned MNEs Domestic_MNEs
Foreign_owned_MNEs
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Gross exports Value added
exports
Gross exports Value added
exports
Gross exports Value added
exports
Gross exports Value added
exports
Denmark Finland Norway Sweden
Independent - Micro
Independent - Small
Independent - Medium
Dependent - Micro
Dependent - Small
Dependent - Medium
Large
0%
10%
20%
30%
40%
50%
60%
70%
Exporters
Importers
Two-way
traders
Non-Traders
Exporters
Importers
Two-way
traders
Non-Traders
Exporters
Importers
Two-way
traders
Non-Traders
Exporters
Importers
Two-way
traders
Non-Traders
Denmark Finland Norway Sweden
Direct exports Indirect exports
Exports (gross and value-
added) by firm category
Jobs dependent on foreign
final demand by trading status

29.
Revealing important insights
OECD Statistics Directorate 32
0%
10%
20%
30%
40%
50%
60%
70%
AUT BEL CZE DEU DNK ESP FIN FRA GBR HUN ITA MEX NLD POL PRT ROU SVK SVN SWE TUR USA
SMEs' share in gross exports SMEs' share in value added exports
0
10
20
30
40
50
60
70
80
90
100
DVA
Exports to
ROW
DVA
Exports to
EU 27
SME exports
to EU27
Large
exports to
EU27
Large
SME
DVA exports, % of total 2014
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
ROW EU27
SME
Large
Gross exports

30.
Analytical database on individual multinationals:
ADIMA
Register Indicators Monitor
All enterprises (parents +
affiliates):
Consolidated balance sheet Changes in
register variables,
based on text
analytics of
unstructured big
data sources (e.g.
Open Street Map,
GDELT, MNE IR
and Jobs
websites),
classified by
MNE, country and
industry
Enterprise Identifiers
(ISIN, LEI, CIK)
Assets (current; PPE;
intangibles; …)
Address/country of
operation
Liabilities (current; long-term)
Industry (ISIC rev 4) Equity
Immediate and ultimate
parent IDs
Consolidated income statement
Demographic events +
dates
Revenues/turnover
Ultimate Parents only: Expenses (COGS, SG&A,
subcomponents)
Consolidated industry Profitability (EBIT, EBITDA,
net income)
Year of incorporation Employment
Country of global decision
centre
Share of int'l sales, assets,
employment, …
Country-level sales, assets,
employment, …
Register-derived indicators (#
affiliates, # countries, spread)
Entropy measures of
internationalisation
To cover
‘top’ 500 by 2020
Criteria
Revenues.
Stock listing.
Multinational.
Beginning to look at state owned firms >>Competitive neutrality

31.
Using only publicly available (sustainable) sources, with
innovative, efficient, smart data tools
How?
• Company annual reports, Street
maps, wiki data (e.g. filed to the
US SEC)
• Orbis (commercial data source,
to be phased out)
• LEI (from the GLEIF)
• Fuzzy matching techniques to develop
a single register
• With variety of methods to estimate
geographical breakdowns
Refinements continue to be made.
Countries can play crucial role in
development of Validation
mechanisms of affiliate data to
accelerate the process and improve
quality of assumptions

32.
Digital Trade> Handbook out in March
Included in the
SNA production
boundary
Excluded in the
SNA production
boundary
Producers
('Who')
Corporations
Households
Government
NPISH
ROW
Product
('what')
Goods
Services
Information /
Data
Nature
('how')
Digitally
ordered
Digitally
delivered
Digital
intermediary
platform-enabled
Users
('who')
Corporations
Households
Government
NPISH
ROW

33.
Digital Trade: New challenge but similar problems
Granularity: Need information on
types of firms:
– Digital intermediaries (by function)
vs e-tailers
Gross or net?
IPPs
Treatment of non-market
transactions??>DATA

34.
New developments
Market price view of GVCs
Domestic services value-added content of textiles exports (basic versus F.O.B prices)
Domestic value-added generated & persons employed via sales of imports, by source of demand

35.
Moving forward
Much has been done but much remains to do.
OECD keen to explore collaboration with ONS:
e.g. through Extended SUTs > broken down by: non EU/EU exporters, size
class, with employment variables (salary, headcounts, hours worked,
region?)

36.
UK Trade
- New Frontiers in Trade
Analysis
Head of UK Trade Operations, ONS
James Wells
29 January 2018

37.
What have our users told us were their
priorities for improving trade statistics?
• More granular detail
• More timely and frequent publications
• Wider coverage and more dimensions
• Easier ways to access data
• More insightful analysis
• More, more, more…

38.
 ITIS sample doubled in size to 2.2k businesses
 Quarterly country by service type data
 67 countries by 31 service types
 Chained volume measures
 Implied deflators
Trade in services improvements we
have delivered in the past 12 months

39.
 Monthly country by commodity data
 234 countries by 125 commodities
 Annual industry by country and by commodity
 Chained volume measures
 Implied deflators
Trade in goods improvements we have
delivered in the past 12 months

40.
Interactive global maps to explore UK trade

41.
New more insightful
analysis…

42.
0 10 20 30 40 50 60
28 Manufacture of machinery and equipment n.e.c.
47 Retail trade except of motor vehicles and
motorcycles
29 Manufacture of motor vehicles trailers and semi-
trailers
30 Manufacture of other transport equipment
46 Wholesale trade except of motor vehicles and
motorcycles
EU Non-EU
Top five UK trade in goods exporting
industries, 2016
£ billion, current prices

43.
£ billion, current prices
0
5
10
15
20
25
30
Non-EU EU
Imports
Exports
Industry SIC 29 ‘Manufacture of motor
vehicles, trailers and semi-trailers’, 2016

44.
Exports by industry SIC 29 ‘Manufacture of
motor vehicles, trailers and semi-trailers’, 2016
0.0
1.0
2.0
3.0
4.0
Germany United
States inc
Puerto Rico
China Italy Netherlands Spain Belgium France Australia Turkey
£ billion, current prices
Non-EU EU

45.
Annual Business Survey (ABS) Industry SIC 29
Turnover £74bn
aGVA £17bn
Number of enterprises 3,235
% of enterprises that export 27%
Number of people employed 159,000
Industry SIC 29 ‘Manufacture of motor
vehicles, trailers and semi-trailers’, 2016

46.
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total Imports
Total Exports
UK trade in road vehicles fell in the latest 12
month period, the first fall in nine years
£ billion, non-seasonally adjusted, current prices
12 months to November on a rolling basis

47.
-800
-600
-400
-200
0
200
400
600
800
12-months to Nov17 12-months to Nov18
Germany Spain France Czech Republic Belgium
Japan Slovakia Italy South Africa Hungary
£ million, non-seasonally adjusted, current prices
Change in the value of total UK imports of
road vehicles by top 10 contributor countries
12 months to November 2017 and 12 months to November 2018

48.
-400
-200
0
200
400
600
12-months to Nov17 12-months to Nov18
DE Germany BE Belgium IT Italy FR France ES Spain
£ million, non-seasonally adjusted, current prices
Change in the value of road vehicle exports to
the EU by top 5 contributor countries
12 months to November 2017 and 12 months to November 2018

49.
-200
0
200
400
600
800
1000
1200
12-months to Nov17 12-months to Nov18
United States inc Puerto Rico South Korea Japan Norway United Arab Emirates
£ million, non-seasonally adjusted, current prices
Change in the value of road vehicle exports to
non-EU countries by top 5 contributor countries
12 months to November 2017 and 12 months to November 2018

50.
 More granular detail
 More timely and frequent publications
 Wider coverage and more dimensions
 Innovative tools for accessing data
 More insightful analysis
with more to follow…

51.
The Weaponization of Trade:
can data disarm politicians?
Dr. Rebecca Harding
CEO, Coriolis Technologies

52.
Why is this even a topic?
The Economic
Nationalists
The New
‘Globalists’
TRADE WAR
OR
WEAPONISED
TRADE?
Bilateralism Multi-lateralism

53.
Yet trade in 2017 picked up
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Annual
growth
rate
(%)
Gross domestic product, constant prices Trade volume of goods and services
Source: IMF April 2018

54.
Trade: GDP ‘business as usual’?
-2
0
2
4
6
8
10
MENA Sub-Saharan Africa Latin America Advanced economies G7 World Emerging markets Emerging Asia CIS
%
change
2016-17
GDP growth (%) Goods and services export volume growth (%)
Source: IMF April 2018

55.
But there are headwinds
• 2018 did not deliver the promised growth in volumes
• Brexit in the UK is creating uncertainties for SMEs here:
• Access to finance a bigger issue than a year ago
• Evidence that investment is being held back
• Currency volatility keeps importers and exporters awake at night
• Global supply chains are likely to be affected
• 2017 was the worst year on record for trade finance
• $1.5tn trade finance funding gap for SMEs globally as banks move up value
chain to mitigate risks
• Increasing perception that protectionism is on the rise
• And more worryingly, trade is being weaponised

56.
Trade is weaponised rhetorically
2017 2018

57.
Focus is Make America Great Again
2017 2018

58.
New approach to
unstructured data
highlights importance
Unstructured data
Neuro-
linguistics, AI
Geopolitical
risk
Reputation
risk
Monthly &
high
frequency
• Trade Based Country Risk
• Regular alerts
• Detailed company& country
risk analytics
• https://public.tableau.com/
profile/multilateral.by.corio
lis.trade.tech#!/vizhome/Rh
etorical_Risk_Map/Political
Tension
61

59.
Trade is being weaponised literally

60.
And not in the usual suspects…
Is something changing?
• Norway, Sweden, Finland imports
• Turkey imports
• Australia imports
• Canada exports
• Mexico exports
• China exports

61.
In short, trade is strategic
Trade
Foreign
Policy
Krugman
Stiglitz
Baldwin
Clausewitz
Liddell-Hart
Smith

62.
Trade wars aren’t about trade
• This is about the political response to populism
• Trade is a useful tool in a nationalist rhetoric
• Speaks to a domestic audience
• Re-creates national identity – eg the British ‘exports are GREAT’ campaign and
obviously, Make America Great Again
• Identifies ‘enemies’ (across the table…)
• Use of national security as an excuse for trade wars marked a major
strategic shift:
• Undermines the WTO and other multilateral trade organisations (NAFTA, EU)
• Makes trade zero-sum with clear national winners
• Uses trade as a tool of coercion and influence

63.
Are we measuring the right thing?
Digitisation, AI
& Big data
Regulation
Digital
Services
Greater politicisation of
trade
Cross border
knowledge flows
The Shifting World of Trade

64.
What next for data science?
• The world of trade has become more complex in the last 3 years
• Many of the risks at the moment are perceived
• But trade is slowing and UK businesses are worried…
• …as politics begins to have real economic impact
• Problem for the sector is not what we know, but what we don’t know
• This is a real data challenge
• Unless we address it, politics will continue to fight last century’s trade
war

65.
Thank-you

66.
Round-up and closing
remarks
Chief Economist
Grant Fitzner
29 January 2019

67.
Changes to Labour Market release – March 2019
Labour
Market
Statistics
Labour Market
overview
Employment
in the UK
Earnings
Jobs &
vacancies
• Move from single release to overview and three supporting pages
• Planned for release on 19 March 2019
• All current data tables available
• Further details contact labour.market@ons.gov.uk

68.
Final Reminder - Governance of
Statistics inquiry
Launched by the Public Administration and Constitutional
Affairs Committee, examining the role and performance of
the UK Statistics Authority (UKSA)
Deadline for written submissions 1 February 2019
Further information: www.parliament.uk

69.
Future dates for your diary
13 March – UK Productivity Forum, 1 Victoria Street, London
29 April – ONS Economic Forum, The Royal Society, London
15 July – ONS Economic Forum, venue tbc
Further details can be found at: ons.gov.uk/economicevents

70.
ESCoE Conference on Economic Measurement 2019
8-10 May 2019
Kings College, London
Registration opens on 1 March 2019
escoe.ac.uk

71.
27th International Input-Output Association
Conference
Registration opens on 1 February 2019
www.iioa.org.conferences